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China Construction Machinery Automation

Chinese construction machinery companies have been gaining global market share in the past few years with cost competitive products and well-established supply chains. In this article, we will explore how automation and digitization is applied in the construction machinery industry to help Chinese companies further expand their global footprints.

Lighthouse Factory Inclusion

Chinese machinery manufacturers used to be regarded as smart followers that could provide cost competitive products despite a lack of core technologies of their own. However, as they step up investment in automation and digitalisation, these companies are gradually narrowing their gaps with international players. Some even show capabilities to lead global technology competition in certain areas and threaten top tier construction machinery companies, such as Caterpillar in the US and Komatsu in Japan.

The Davos World Economic Forum (WEF) recently published the latest batch of “Lighthouse” factories in the global manufacturing industry. SANY’s drilling machinery factory in Beijing was included in the list, making it the first certified Lighthouse factory among heavy equipment manufacturers. Since 2018, a total of 90 factories have been selected as Lighthouse factories which are well known for being the most advanced factories in the world.1 This marks a significant achievement in Chinese construction machinery companies’ expedition to lead global manufacturing technology.

Among the 90 projects listed in the Global Light House network, there are many other Chinese manufacturers, including CATL, CITIC Dicastal, Foxconn, Haier, Midea, Innolux, etc. 2

Automation and Digitalization Adoption

Though Chinese companies are in general still lagging global peers in terms of material quality, performance stability and production knowhow in high-end applications, they have not stopped redesigning their existing production lines and deploying advanced manufacturing at scale with the help of automation to gain market share.

Automation solutions come with many tangible benefits including shorter response time, better product quality consistency, easier product customization, lower labour dependence, easier product and process innovation, and more efficiency usage of raw material and energy.

Take SANY as an example. According to WEF, SANY’s drilling machinery factory in Beijing reached an average automation penetration of 70-90% compared to 0-50% prior to the upgrade.3 The outcome of higher automation penetration includes +130% welding production efficiency, +100% production capacity, -83% in model changes time, -50% in average transferring time, and +31% machine efficiency.

As industry leaders accelerate embracing automation and digitisation in their manufacturing process, more companies are expected to follow suite to revamp their production lines, especially those within the same industry or cross industries. Industry followers now have more quantifiable measures (e.g. return on investment and payback period) to justify the incremental spending.

To better adopt automation and digitalization in the work place, some Chinese construction machinery factories have re-engineered the whole manufacturing process by 1) connecting all the production equipment to monitor and control the output and performance digitally; 2) using scanners, sensors, and robotics in the manufacturing process such as material feeding, welding and processing; 3) using machine vision and sensors for product quality assessment; 4) creating augmented reality employee training, etc.

We believe the positive feedback loop brought by automation and digitization will further enhance China’s construction machinery sector with more product innovation and customization. Companies involved will also be able to generate better returns which can then be reinvest into their business.

Marcus Chu
Investment Analyst

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